3.2.2 Mergers and Takeovers

• Mergers and takeovers can help businesses gain access to new customer segments or technology.
• Match the motive with its example:

  Expansion ↔️ Two supermarket chains merge

  Cost Reduction ↔️ Manufacturers combine to lower supply chain expenses

  Market Access ↔️ A technology firm acquires a startup

  Synergy ↔️ Pharmaceutical companies combine research capabilities
• What is one advantage of mergers and takeovers for businesses?

  Increased market share
• Economies of scale achieved through mergers and takeovers lead to cost reduction.
• Cultural clashes are a potential disadvantage of mergers and takeovers.
• Match the aspect with its advantage and disadvantage:

  Market Impact ↔️ Increased market share ||| Reduced competition

  Financial ↔️ Economies of scale ||| Financial risks and debt

  Operational ↔️ Synergy and combined strengths ||| Cultural clashes

  Human Resources ↔️ Access to new talent ||| Job losses
• What is one potential negative impact of mergers and takeovers on employees?

  Job losses
• What is a merger in business terms?

  Combining two companies voluntarily
• Mergers typically involve a cooperative arrangement between companies.
• Mergers occur when two companies voluntarily combine to form a single, new entity
• What is a takeover in business terms?

  Purchasing another company
• A hostile takeover occurs when the target company approves the acquisition.

  False
• In a takeover, the acquired company becomes a subsidiary of the acquirer
• What is a horizontal merger?

  Firms in the same industry
• A vertical merger involves firms at different stages of production
• A vertical merger combines firms in the same industry.

  False
• Give an example of a horizontal merger.

  Two supermarkets merging
• A conglomerate merger involves firms in unrelated industries
• Match the type of merger with its example:

  Horizontal ↔️ Two supermarkets

  Vertical ↔️ Manufacturer and supplier

  Conglomerate ↔️ Technology firm and food manufacturer
• How many main types of mergers are there?

  Three
• A horizontal merger involves firms in the same industry
• A vertical merger occurs between firms at different stages of production.
• A conglomerate merger involves firms in unrelated industries.
• What is an example of a horizontal merger?

  Two supermarkets
• A vertical merger combines firms at the same stage of production.

  False
• A conglomerate merger combines firms in unrelated industries
• What type of merger involves a manufacturer and a supplier?

  Vertical
• Arrange the types of mergers from least to most related industries:

  1️⃣ Conglomerate merger

  2️⃣ Vertical merger

  3️⃣ Horizontal merger
• Mergers are a form of business expansion similar to takeovers.
• One motive behind mergers is to reduce costs and achieve economies of scale.
• Mergers and takeovers always lead to increased market position and profitability.

  False
• One advantage of mergers is increased market share and reduced competition.
• What is achieved through economies of scale in a merger?

  Cost reduction
• Synergy in a merger refers to combining complementary strengths and resources.
• One disadvantage of mergers is cultural clashes and integration challenges.
• What is a potential financial risk associated with mergers?

  Debt
• Arrange the disadvantages of mergers from most financial to most operational:

  1️⃣ Financial risks and potential debt

  2️⃣ Job losses and redundancy costs

  3️⃣ Cultural clashes and integration challenges

  4️⃣ Potential loss of identity or autonomy
• Match the aspect with its advantage or disadvantage:

  Market Share ↔️ Increased and reduced competition

  Financial Risk ↔️ Potential debt

  Integration ↔️ Cultural clashes

  Efficiency ↔️ Economies of scale
• What is a potential cost reduction strategy in mergers?

  Economies of scale
• What is one advantage of mergers and takeovers in terms of market impact?

  Increased market share